Unfair competition in a sense means that the competitors compete on unequal terms, because favourable or disadvantageous conditions are applied to some competitors but not to others; or that the actions of some competitors actively harm the position of others with respect to their ability to compete on equal and fair terms. It contrasts with fair competition, in which the same rules and conditions are applied to all participants, and the competitive action of some does not harm the ability of others to compete. Often, unfair competition means that the gains of some participants are conditional on the losses of others, when the gains are made in ways which are illegitimate or unjust.
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To an important extent, the principles of fair competition in the business world are defined by law, and therefore unfair competition may well be unlawful or criminal. But because the forms of competition can change continually and new forms of competition may arise, competition may be unfair, but not illegal, at least not until a legal rule is explicitly made to prohibit it. The exact meaning of unfair advantage or harm caused in business competition may be vague or in dispute, in particular if different competitors promote different interpretations which suit their own interests. It may be difficult to define what it would mean to compete on equal terms, and the operative terms of competition that exist in reality may be challenged only when a participant is seriously disadvantaged by them. Often "equal terms" is defined as an "equal opportunity" or "equal chance" to compete.
Unfair competition may occur in games if a participant in some way deviates from the rules of the game, or has privileged access to important information or resources that should in principle be available to all participants in the game, or none of them. Participation in the game normally assumes that participants have an equal ability to compete in relevant respects, or are able to acquire it during the game. In sports, for example, a heavyweight boxer is not usually played against a lightweight boxer, and the secret use of drugs to enhance sports performance is usually prohibited in competitions.
Sometimes unfair competition is also interpreted to mean that the existence of competition as such is unfair or unjust. The argument is then that there should not be any competition. In this case, the alternative to unfair competition is not fair competition, but no competition or cooperation.
Unfair competition in commercial law refers to a number of areas of law involving acts by one competitor or group of competitors which harm another in the field, and which may give rise to criminal offenses and civil causes of action. The most common actions falling under the banner of unfair competition include:
Various unfair business practices such as fraud, misrepresentation, and unconscionable contracts may be considered unfair competition, if they give one competitor an advantage over others. In the European Union, each member state must regulate unfair business practices in accordance with the principles laid down in the Unfair Commercial Practices Directive, subject to transitional periods. (See also trade regulation law.)